Q&A: Sugarman on Sugar, Fats, and the American Diet

Stephen Sugarman

By Susan Gluss

As the new year begins, many Americans take part in a classic ritual: New Year’s resolutions. Topping most lists is ‘diet and weight loss.’ How many of us vow to shed a few pounds and exercise more? Enough to create a multi-billion dollar diet industry. But, despite our good intentions, diets typically fail. Some blame it on lack of discipline, but others, like Professor Stephen Sugarman, say not so.

Sugarman lays the blame squarely on the retail food industry—large box stores and chain restaurants that sell foods high in sugar, salt, and saturated fat. How can Americans stay slender when most of the foods they buy are laden with hidden calories?

Obesity brings with it serious health problems like heart disease, high blood pressure, and diabetes. The growing U.S. waistband translates into skyrocketing health care costs and an estimated 300,000 deaths each year.

What’s to be done? Sugarman wants supermarkets and restaurants to reduce the excess sugars, fats, and calories in products they sell—or face financial penalties.

This approach is called “performance- or outcome-based regulation.” It’s similar to “cap and trade” policies enacted to slow climate change, where companies must reduce the amount of carbons they emit, or pay a hefty fine. Professor Sugarman wants similar action taken against the food and beverage industry.

A: I hit upon the idea that we could ask the food industry to reduce the bad outcomes of their own products—such as heart disease and diabetes—caused by poor diets. That’s the idea behind outcomes- or performance-based regulations: we regulate the result, the performance, the outcome. And we let companies figure out how to do it.

We’re not going to solve medical problems completely by changing what people eat. But we can bring about substantial changes through this initiative.

Q: What would the food industry have to do under your plan?

A: Over five years, retail supermarkets like Safeway, Walmart, and Costco, plus large chain restaurants, would have to reduce the amounts of sugar, sodium, and saturated fats in products they sell by 25 percent. They’d also have to reduce the overall calories sold by 10 percent—or two percent a year for five years. That would bring the American diet back to where the average calorie consumption was 25 years ago.

Q: Didn’t the food industry already try this?

A: Several companies pledged to do something of this sort voluntarily. But, in the end, they proposed a reduction of about 14 calories per day; we need to cut 250 calories a day to get the overall 10 percent rollback. Walmart promised to reformulate its products, but just for its own private brand.

It’s a move in the right direction, but not big enough. It shows you that retailers, too, believe that focusing on outcomes is a good thing, and that they can figure out themselves how to do it.

Q: Is your proposal a way of enforcing corporate social responsibility?

A: Companies sometimes engage in corporate social responsibility to ward off regulation. They don’t really want to do it, but it’s better than the alternative. And there can be some social gain. In the end, though, it’s hard to see how companies, absent legal requirements and sanctions, can ever be expected to act individually to sacrifice too much of the bottom line. If the whole industry is required to change, then the social burden is shared.

Q: Why is performance-based regulation better than some of the other ideas being proposed, including higher taxes on sugary drinks?

A: Because it focuses on what we care most about—the outcome. We don’t really care whether, for example, people drink 16- or 24-oz sodas. Portion size is just one strategy among others—like taxes—to try to reduce the consumption of sweets. But our ultimate aim is healthier diets. So, let’s focus on the larger goal. That’s one big advantage of outcome-based regulations: you actually focus on the results you want. You then leave it to the creativity of business to do it in the most effective way.

Q: What are some of the pitfalls of outcome-based regulations?

A: You have to have an outcome that truly captures what you want that can be measured accurately and enforced properly. If you don’t have those features, then you’re going to have a misalignment.

For example, in No Child Left Behind, our goal was to better educate our kids. Policymakers said students had to do better on tests measuring math and English. But even if you get better scores, you might not get better-educated kids. Why? Because to achieve it, some schools had to give up art, music, and physical education and just teach to the tests. So, you need to be confident that you’re setting a goal that you care about and that it’s relatively easily measured and enforced.

Q: How would stores and restaurants implement the law?

A: The creativity is in how they do it. Restaurants can make the portion sizes smaller, they can change where sweets are located on the menu, they can refine the ingredients, and more. Retailers can alter their advertising, switch the products they carry, choose which shelves to put them on, and so on. All these things have an influence on what people buy. It’s not just about raising prices.

Q: Why is it up to the retailer and not the companies that make the products, like Kraft?

A: Certainly, companies like Kraft can make their pasta sauce with less sugar, and they can make cookies with less fat. But Kraft can only focus on its own products. Stores like Trader Joe’s can focus on the entire food consumption pattern of all its customers.

Retailers are in the position to make the most creative range of changes, including leaning on the providers to modify their products. They’re in the leveraged position.

Q: What about penalties if companies fail to comply?

A: Penalties have to be substantial enough that firms will take action rather than pay the fine. If they just absorb the penalty, my plan is a tax. But you don’t want that—you want retailers to take it seriously. On the other hand, you don’t want the penalties to be excessively draconian.

Similarly, with the targets, you want the outcome improvement to be substantial, but not unattainable. It’s important to try to carefully calibrate how much to ask for and how much to penalize.

What you really want is to change overall social norms about eating. The norm of what people eat would look different if the average consumption of sugar, fat, and salt is down by a quarter.

Q: How would it impact U.S. healthcare costs?

A: There are two big problems in our country. A lot of people don’t have insurance and, as a result, either don’t get care, get it too late, or storm emergency rooms. It’s expensive and not the right sort of care. That’s one big problem. The second big problem is that health care costs are much too high compared to the rest of world. These are two huge problems. Obamacare intends to deal with both of them. But, in the long run, the main hope for reducing health care costs is prevention.

Q: Does Obamacare focus enough on preventive care?

A: We’ll have to see how the funding plays out. Obamacare pays some attention to prevention, but it’s not the central focus—it’s more on access to and the delivery of health services. I’m talking about reducing the demand for health services by keeping people healthier in the first place.

Of course, if people can see doctors sooner, and get the right kind of care, we’ll have fewer expenses later on. That’s partly why, in terms of expenditures—and for fairness and humanitarian reasons—Obamacare will get people medical services when they need it. But I’m talking about health in a very different way. I focus on behavioral health problems that can be caused by too much, eating, drinking, smoking, and more.

Critics say it’s all about personal responsibility, but that doesn’t get you anywhere. We need collective action, and we need government to help us fight against addictive, seductive or dangerous products.